By: Bill and Cindi Porter, AILERON INVESTMENT ADVISORS
Q: Should I get out of the stock market given the recent volatility?
A: IT DEPENDS ON YOUR SPECIFIC RISK TOLERANCE AND SITUATION. Consider this: since 1960, there have been 20 bear markets (a drop of more than 20%)¹. Yet the stock market has always rebounded and then reached new highs – every time. Being out of the market can be very expensive.
The average duration of those 20 bear markets was 10 months and they resulted in an average return of negative 26.6%². The following 20 bull markets averaged 29 months and resulted in a positive 77.9%.
That point is worth repeating but we will use different data to add focus. Since 1937, the S&P 500 was negative 21 years with an average negative annual return of -12.5%. During that same period, the S&P 500 was positive 67 years with an average 19.9% positive annual return. Adding the negatives and positives together, the S&P 500 has averaged a positive annual rate of 10.7%.
BUT, you had to remain invested – even in the down markets – to realize the 10.7% average rate of return.
There has always been and always will be stock market turmoil: in 1990 over 1,000 banks and S&Ls failed, in 1994 the bond market crashed, in 2001 the World Trade Center was destroyed, in 2008 the housing crisis, and in 2020 the Covid meltdown. The stock market rebounded following these events and every other setback it has ever encountered. While that is not a future guarantee, it is a very important reminder.
Long-term investors will undoubtedly experience both up and down markets over the years. Historically, long-term investments have been an important piece of a portfolio.
If you are feeling unsettled because of market volatility, a conversation with your trusted advisor would be advisable.
¹. https://www.franklintempleton.com/forms-literature/download/IBS-BBFL
². https://www.mufgamericas.com/sites/default/files/document/2022-06/chart-of-the-day-6-16- beware-the-bear.pdf
For more information about Aileron Investment Advisors visit www.investwithaia.com.
Investing involves risk, including the potential loss of principal. This is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.
Securities and advisory services are offered through Madison Avenue Securities, LLC (“MAS”), a registered investment adviser & member FINRA/SIPC. MAS and Aileron Investment Advisors are not affiliated companies. 4/8/2025
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